AHDB Pig Market Weekly

AHDB Pig Market Weekly - 31 October 2013

Latest AHDB/BPEX forecasts for UK pig meat supplies predict that the tight situation on the UK market may ease somewhat in 2014, although availability would still be below the levels recorded in 2012.

With data from the June Agricultural Survey showing a 2% year-on-year decline in the UK breeding herd, numbers of finished pigs will remain constrained in the near future. With producers having lost money for a sustained period, confidence will be slow to return. Therefore, it is unlikely that there will be any significant expansion of the breeding herd in the near future. However, with a more stable position, productivity gains should mean that slaughterings resume their upward trend as 2014 progresses, with throughputs for the year as a whole forecast to be 2% up on 2013.

Unless feed prices rise again, sow slaughterings and carcase weights are expected to be similar to those in 2013, meaning that pig meat production is set to rise at a similar rate to clean pig slaughterings, topping 850,000 tonnes for the first time since 2000. UK imports have been subdued so far this year and only a modest recovery is forecast for 2014, assuming the gap between EU and UK pig prices doesn’t grow significantly. Further growth in exports is expected, given higher production and the possible opening of more markets for a wider range of products. These developments mean that supplies available for consumption on the UK market in 2014 may be slightly higher than this year but will remain lower than in previous years.

More details on the outlook for UK pig meat supplies can be found by clicking here.

EU pig prices fall back from near-record highs

Recent weeks have seen a reversal of fortunes in the EU pig market. Having risen steadily since May, the EU average price reached a peak in the first week of September at over €195 per 100kg. This was the highest level it has reached apart from during the FMD outbreak in March 2001. However, since then the price has fallen back by nearly €16 in six weeks to stand at €179.83 in week ended 19 October. The change of trend has been driven by a reported increase in the supply of pigs in recent weeks, relieving the tight supply situation which had prevailed over the summer. This is partly because pigs whose growth was slowed during the heat of the summer have now come to market.

The recent price fall was initially most apparent in northern Europe, precipitated by a drop in the German price, which fell by €14 in the three weeks to 22 September. The exception was Denmark, where robust export markets kept prices steady through most of September. Further south, prices remained stable or even increased until late September but have since matched the falls seen a few weeks earlier further north. The UK was one of the few member states where prices were still rising. As a result, the UK price premium opened up to nearly 16p per kg in the latest week. However, this was still smaller than in May, before EU prices started rising, when the gap was over 20p.

Outlook Conference 2014

The 2014 Outlook Conference, jointly hosted by BPEX, DairyCo and EBLEX, will be held at One Great George Street in London on Wednesday, 12 February 2013. The three livestock divisions of the Agriculture and Horticulture Development Board (AHDB), representing pigs, dairy, and beef and sheep, along with AHDB Market Intelligence, will host a programme exploring factors that will affect businesses in their respective sectors. Topics will include supply chain matters and international trade developments.

There will also be separate breakout sessions covering each sector. For the pig sector, this will include the latest outlook for UK, EU and global markets and an overview of the latest situation in the poultry sector. Booking details for the event are being finalised and are expected to be published within the next month, when the full programme will also be available.

UK pig prices

The EU-Spec DAPP for the week ended 26 October was almost unchanged at 172.10p per kg. This was a week-on-week rise of 0.06p per kg. The situation in the finished pig market was somewhat similar at this time last year, when prices were also moving up gradually but at a lower level; the annual difference remained large at 13p per kg. The estimated weekly slaughterings totalled 164,500 head during the week. This was 6,100 head down compared with the same week in 2012. Carcase weights edged up marginally to 80.30kg for the week ended 26 October and remain almost a kilo up on the year.

The weaner market also remained almost unchanged for the week ending 2 November at £54.26 per head. This reflected the sluggish finished pig market and the continuing shortage of finishing places. Nevertheless, the price for the latest week was almost £12 per head higher compared with the same week last year.

Firm US pig price despite stable production

US pork production this year has been little changed from 2012, with January to August throughputs of 73.3 million head. This was largely as anticipated, although July and August figures suggest lower than expected third quarter production, perhaps partly due to the impact of the PEDV outbreak. Although carcase weights were marginally down overall, they were at their lowest point at the beginning of 2013, before picking up in the second quarter. This is likely to be due to producers properly finishing pigs, encouraged by falling feed costs. Sow slaughter for the year to August was 1% lower than in 2012 at 1.96 million head, having been higher on the year early on, indicating greater optimism as production costs have fallen.

Third quarter pig prices were unexpectedly high, especially in September. Indications suggest tightened supply in that month, although demand certainly encouraged the price up to a record $83 per 100lb liveweight, 63% higher than last year and 9% above August 2011, the previous high point. Strong domestic demand outweighed sluggish foreign sales, although export markets performed better than earlier in the year. Rising prices of competing meats and demand for pork belly products, which notably increased carcase values, both stimulated pig prices. Firm Chinese demand for offal may also have contributed.

Latest USDA forecasts estimate a 2.5% increase in fourth quarter production, from both higher throughputs and carcase weights. A further rise is expected in 2014. USDA estimates that the price will subside during quarter four, although remaining above 2012 levels, as greater supplies come through to meet demand. Early 2014 prices are estimated to be slightly below where they were this year.

EU–Canada Deal Set to Challenge Markets

The European Union and Canada have agreed on conditions for a new trade agreement, potentially worth an extra €26bn in trade between the two markets. The Commission claims that the agreement could potentially boost EU GDP by around €12bn per year, while the British government believes that the deal will be worth an extra £1.3bn a year to the UK. However, pig farmers within the EU are less likely to be celebrating the outcome of the trade deal. The change to the current pig meat quotas is only one-way; it has been reported that Canada will see a 75,000 tonne increase (up to approximately 80,000 tonnes) to their export quota for Ractopamine-free pig meat, while the EU’s export quota to Canada will not change. Canada has, however, agreed to recognise 145 EU Geographic Indications (GI) products, giving products such as traditional Cumberland sausages a stronger position in the Canadian market.

Costs of production in Canada are around a quarter lower than in the EU, according to data from InterPIG, an international group of pig economists. This means that Canadian pig meat imports would be competitive in the EU market. Despite this, imports of fresh and frozen pig meat to the EU from Canada have fallen from a recent high-point of 50,400 tonnes in 2006 to negligible levels in 2012. Several major pig meat importers have imposed trade restrictions on Canada over the issue of Ractopamine. With overseas opportunities narrowing for Canadian producers elsewhere, the trade deal with the EU could result in Canadian pig meat exports being increasingly targeted towards European consumers.

Feed market update

The UK feed wheat Nov-13 futures price closed at £164.50/t on Tuesday, a slight decrease from a week earlier. The Chicago Dec-13 wheat contract closed 2.8% lower on the week and the Dec-13 maize contract was 1.4% lower than the settlement price as at last Tuesday. The wheat/maize spread has been fairly stable recently and as long as there are no further ‘surprises’, wheat prices could be more influenced by maize than in recent weeks. This may be bearish for wheat prices and increase its attractiveness for use in feed, considering the forecast size of the ongoing US, EU and Ukrainian maize harvests.

The Chicago soyameal Dec-13 futures price settled at $452.97/t on Tuesday (29 October), down $5.84 (1.3%) on the week. Better than expected soyabean yields in the US and good prospects for the Argentine crop are behind an upward revision of global soyabean output estimates from Lanworth. Planting of the Argentine soyabean crop began last week with a larger area expected. In the UK, the Hi pro soyameal (Ex-store, East Coast) price for October delivery was £393/t on Thursday (24 October), up £2 from the previous week. The rapemeal (Ex-mill Erith) price for November delivery rose by £11 over the week to £215/t, as at 24 October.

To read more about the latest developments in the feed market, click here.

Lower import demand in Asian markets

In the period between January and September this year, pork imports into Hong Kong fell by 6% compared with the same period in 2012. This was due to lower demand during the first two quarters. Shipments from the two largest markets, Brazil and China, increased by 8% and 5% respectively. However, the increases were partly offset by a 21% reduction in supplies from the EU, with Germany particularly hard hit. There was also 23% less pork imported from the US compared with the January and September period last year. However, at 60,600 tonnes, the July to September quarter showed an increase of 21% on the year. The recovery was largely a result of a sharp increase in imports from Brazil, although EU and US shipments also rebounded and were up on the year.

At the same time, the import market continued to shrink in South Korea, as shipments were down by a quarter compared with the same period in 2012. Imports from all major suppliers were lower, which was a direct consequence of a recovery in the country’s domestic production. Producers have successfully re-built the pig herd since the FMD outbreak, which has reduced the country’s dependency on imports. The US supplied 15% less pork compared with the nine months in 2012, while imports from the EU and Canada were both down by around a third.

October Pig Market Trends out now

The October edition of Pig Market Trends (PMT) was published on Tuesday. As well as the usual coverage of producer prices, slaughterings and production, trade, retail sales and prices, costs of production and other industry news, this month’s edition focuses on the latest forecasts for UK pig meat supplies.

Key messages this month include:

Pig prices moving up again in September and October, passing 170p/kg for the first time

UK clean pig supplies remain close to last year’s level in September but weights heavier, sow kill lower

UK pig meat imports remain subdued in August, with pork, bacon and sausage shipments all lower on the year

UK pork exports higher in August but growth slower than earlier in the year and offal volumes down

Pork, bacon and sausage sales still subdued by high prices but ham performing well